An investigation into the controversial departure of key directors from Fino Payments Bank reveals potential governance irregularities, prompting questions about shareholder oversight and the bank's future.
BENGALURU – A seemingly calm April in Srinagar belied the brewing storm within Fino Payments Bank. While senior leaders enjoyed an off-site amidst scenic views, a governance crisis was quietly unfolding. The successful IPO of last November and recovering business masked a deeper issue: a clash between the holding company, Fino Paytech Ltd, and its banking subsidiary.
The focal point of the controversy is the rejection by Fino Paytech's board of resolutions passed by Fino Payments Bank, including the re-appointment of Chairman Mahendra Chouhan and independent director Punita Kumar Sinha. This move, executed on the last day of voting, stunned analysts, investors, and proxy advisory firms. The stated reason – a desire for "fresh talent" – rings hollow, considering Fino Paytech granted a second term to its own 76-year-old chairman.
Mint's investigation suggests a critical failure in corporate governance, with institutional shareholders like ICICI Group, Blackstone, and IFC seemingly inactive in holding Fino Paytech's board accountable. A key question remains unanswered: were these major shareholders consulted before the board rejected the subsidiary's resolutions?
Executives familiar with the matter question whether the Securities and Exchange Board of India (Sebi) or the Reserve Bank of India (RBI) will investigate the developments, highlighting the lack of public disclosure and consultation with minority shareholders of Fino Payments Bank.
The contrasting actions of Bharat Petroleum Corporation Ltd (BPCL), a significant shareholder, further complicate the situation. BPCL's nominee on the Fino Payments Bank board approved the appointments, while its nominee on Fino Paytech's board voted against them. This raises concerns about BPCL's internal alignment and its satisfaction with the direction of Fino Payments Bank.
Blackstone's lack of board representation in Fino Paytech, despite being a major shareholder, raises further questions about oversight. The firm's decision not to appoint a successor to a departing director suggests a potentially limited commitment to the company's governance.
This governance crisis casts a shadow over Fino Payments Bank's future, potentially deterring prospective investors and impacting its competitive position in a crowded market. The bank, which aims to serve hardworking Indians with digital banking solutions, now faces the challenge of restoring investor confidence and addressing concerns about its corporate governance practices. The repercussions of this needless controversy remain to be seen, but the need for greater accountability and shareholder engagement is clear.
